Hyundai Motor India Ltd. is set to hit the bourses with its IPO on Oct. 15. The Creta-maker is looking to raise Rs 27,870 crore making it the biggest IPO in India, surpassing Life Insurance Corp. of India's Rs 21,000-crore IPO in 2022. This will be the largest IPO globally in 2024 so far and also make it the first automaker to list in India in over two decades.
The company has sold 1.2 crore cars in India so far and has maintained its double-digit market share so far in its operations in India over the last 20 years.
Issue Details
Offer Date: Oct. 15 to Oct. 17
Price Band: Rs 1,865−1,960 per share
Total Issue Size: Rs 27,870 crore
Offer For Sale: 14.2 crore shares
Minimum Bid Quantity: 7 equity shares
QIB Share: 50%
Retail Share: 15%
NII Share 15%
Maximum Bid Quantity For QIBs: 14,14,16,296 shares
Maximum Bid Quantity For NIIs: 7,07,08,148 shares
Anchor Book Opens: Oct. 14
Use Of Proceeds
Hyundai Motor India will not receive any proceeds from the IPO as the issue consists solely of offer for sale. Entire offer proceeds will be received by promoter Hyundai Motor Company.
Business
Hyundai is the second largest passenger vehicle maker in India after Maruti Suzuki India Ltd., with a market share of 24% as of June 2024. It sold roughly 7.77 lakh vehicles last fiscal, of which 21% were exported to other countries majorly in regions like Africa, Latin America, Middle East and Europe. Its also has the second largest OEM network in India with 1,377 sales outlets and 1,561 service outlets.
Hyundai India major sales is driven through models such as Creta, Exter, Venue, i20 and Nios brands. Its share of SUV sales in its total portfolio has now reached 68% and aids margins as well.
Hyundai India's current annual production capacity stands at 8.24 lakh units with the nation's largest integrated single location car plant in Chennai. The company's newly acquired Pune plant is expected to increase production capacity to 10 lakh units.
The company is also looking to launch the Creta EV by March next year to target the mass market. Currently, Hyundai sells two electric cars in India, namely Kona and Ioniq, in the premium EV space. It also sees its EV strategy as top down approach, with three more electric cars in the pipeline.
Shareholding Pattern
Currently the parent owns 100% shareholding in Hyundai India. They are looking to sell 14.2 crore share in the upcoming maiden share sale. In terms of total percentage of shareholding this indicates to 17.5% stake to be sold by the parent company in India entity.
Currently as mentioned above, the IPO has been reserved with split with QIB/ Retail/ NII at 50%/35%/15% respectively.
Financials
Hyundai India has strong financials to show, with revenue last fiscal coming in at almost Rs 70,000 crore. Along with a robust topline, the auto major also has strong Ebitda margins at a tad over 13%. In comparison to the largest player Maruti Suzuki, this is higher by almost 150 basis points with the latter reporting 11.6% margins in FY24. Profitability also was higher cross Rs 6,000 crore in the previous fiscal year.
Red herring prospectus for the IPO also provides an insight into the June quarter numbers. The company sold 1.92 lakh cars between April and June this year, indicating a 5% growth from the same time last year but also reported strong revenue and Ebitda margins. Margins came in at 13.5% despite strong pricing competition in the industry.
Peer Comparison: Hyundai Scores Well on Valuations
When compared to its peers, Hyundai India's sales is roughly one-third the market leader Maruti, with the latter also boasting double the revenue. Despite this, Hyundai's Ebitda margins are higher by roughly 150 basis points than Maruti.
When compared to Mahindra & Mahindra Ltd., Hyundai sales are much higher and also led by stronger acceptance of products across newer categories, like compact SUV. Mahindra's revenue is also higher due to inclusion of the tractor division revenues which is the higher margin business as well.
Profits as a percentage of revenue is also the highest for Hyundai India.
Key Risks
There are a few risks highlighted by Hyundai Motor India in its RHP:
Increases in the prices of parts and materials required for the company's operations could adversely affect the business and results of operations.
Two of the group companies, Kia Corp. and Kia India Pvt., are in a similar line of business as Hyundai India, which may involve conflict of interests and adversely impact business.
Primary dependence on Group Company, Mobis India Ltd. being a subsidiary of Hyundai Mobis, which is specialised in after-sale parts business for Hyundai Group companies, to supply spare parts for after sale services and the company dealers.
Further, Hyundai India also depends on Mobis to supply modular parts that the company uses in the manufacturing process of passenger vehicles and parts. These constituted 17.91% of total parts and materials supplied in the June quarter.
Dependence on HMC, the company's promoter, for operations, including parts and materials such as engines and transmission assembly, as well as research and development.
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